I’ve decided to keep track of my options trading again and I’ve started this month with a bang. Yes, it’s a catchy title but please let me explain.

Below are the actual trades:

Date

Action

Ticker

Expiration

Strike

Call/Put

Qty

Price

Amount

Fees

Net

Days to Exp

Current Price

52wk range

7/6/2017

Sell

MO

9/21/2018

75

Call

1

$5.15

$514.96

$5.45

$509.51

558

$74.25

60.82 – 77.79

7/6/2017

Sell

MO

1/18/2019

90

Put

1

$19.00

$1,899.93

$5.45

$1,894.48

439

$74.25

60.82 – 77.79

7/6/2017

Sell

BDX

1/19/2018

210

Put

1

$18.00

$1,799.93

$5.45

$1,794.48

194

$197.79

161.29 – 197.85

7/6/2017

Sell

MDT

6/15/2018

97.5

Put

1

$11.25

$1,124.95

$5.45

$1,119.50

341

$87.96

69.35 – 89.72

7/6/2017

Sell

JNJ

6/15/2018

150

Put

1

$19.50

$1,949.93

$5.45

$1,944.48

341

$132.54

109.32 – 137.00

The total of these trades gave me a little over $7262 Net. I’m approved for “naked” options trading meaning I can sell puts on companies I don’t own and without having the cash to purchase said security. Now, I do have a covered call on MO since I own 100 shares and sold 1 call.

My put selling was 3 giant medical companies plus MO. These companies are not going anywhere and I don’t mind purchasing shares if needed. I’m basically asking mr. market to give me some assistance in sending their share prices higher. For instance, if shares of Johnson and Johnson are over the strike of 150 on 06/15/18 then the put will expire worthless and I’ll keep the entire $1,949.93 as profit. Let’s say JNJ is trading at 135 around expiration, about 15 off where I want it. That means the put is worth 15 x 100 or $1500 to buy back if I choose not to execute it.

Am I crazy you might ask? No, not entirely lol. So what happens in the case that one of these companies is lower near expiration? Well, I have a few options.

I can do nothing and I’ll be required to purchase 100 shares of said security at the strike price. It’s sort of like I’m buying the company right now at a discount. For instance, MO is at $74.25/share. I have to pay $90/share but I received a $19 premium or $1900 which is the same as if I purchased the company for $71/share. Now I would miss a couple of dividends but I’m still better off with the put.

I can decide to purchase back the put for more money at a loss of approximately ($71/share – current share value) x 100.

Third option is to “roll” the put forward. What this means is that I simultaneously purchase the put back and sell another longer dated put so that I haven’t lost any money. I’ll show you guys how this works around expiration if needed.

Well, here you are. My crazy put selling frenzy! I need medical companies to stay in favor and I’ll be a happy camper.

I sold out of my position of CSX recently. I decided the company has ran up enough that I could deploy the funds into better areas. Between the health of the new CEO, the fact that shares are now at a P/E of 30 and yield just 1.5% after running up significantly this year, I decided to exit my position fully.

I sold 252 shares of CSX for $52.92/share netting $13,331. My basis was $23.43/share, well over a 100% return and it’s a long-term capital gain since I’ve held shares over 1 year.

So this was a nice chunk of dry powder left after the sale. Here’s what I did with the money and how my income changed.

SOLD

252 shares of CSX – Loss of $201.60/year at $.80/year or about 1.5% yield , proceeds of $13,331

It’s been a while since I’ve done one of these and the market is up quite a lot so it will be interesting to see the outcome.

What I Did

I decided to take the CCC spreadsheet and rank the stocks based on their 10-year YOC. If you are unfamiliar with what Yield-On-Cost is (YOC) then refer to my get started tab or see below for an example. If you don’t know about David Fish’s Champion, Challenger and Contender (CCC) spreadsheet then you are doing yourself a disservice, the link is also on my “get started” tab.

Let’s say you purchased a stock at $10/share in 2013 that paid a 4% dividend or $0.40/share. In order to achieve a 10-year YOC of 10% that stock would need to pay out at least $1.00/share by 2023.

You may wonder why I care about a 10-year YOC instead of just the 1,3,5 and 10-year CAGR’s. The main factor that the CAGR leaves out is the starting dividend yield. The starting dividend in combination with the dividend growth rate will greatly influence your returns.

There’s a variation of this screen used alot by members of the Seeking Alpha community and it’s coined the “Chowder Rule”. This can also be found now on the CCC sheets. The rule basically adds the starting yield with the dividend growth rate (5-year CAGR) and looks for it to be higher than a certain number. While this can be a useful screen, there is still a discrepancy between dividend payers that have different growth rates but still arrive at the same number. For instance, a 3% yielder with 5% growth would get the same grade (an 8) as a 5% yielder with 3% growth. To me this is like adding apples to oranges. Holding a lower yielding stock with a higher growth rate will at some point provide higher returns assuming the growth rates don’t change. My 10-year YOC would give this 3% and 5% yielder a 4.9 and 6.7 respectively.

Why I Did It

The purpose of this screening process will be to identify companies that have a high expected dividend growth rate combined with a starting yield that would produce greater returns. These companies may be good candidates for further research.

How I Did It

The first step was to sort all stocks by their current dividend yield and eliminate any stocks not paying at least a 2% yield.

Next I sorted all columns by TTM P/E and eliminated every stock with a TTM P/E over 20. I do realize this eliminates a lot of REIT’s, MLP’s, and telecom stocks. I’m ok with this since I’m not really targeting these stocks right now. Then I decided to eliminate any Champions with a 10-Year CAGR < 5%, followed by any Contenders with a 5-Year CAGR < 7 % and finally any Challengers with a 3-year CAGR < 7%. This screen eliminates a lot of slow growing companies like utilities.

This last screen dropped the list of Champions, Contenders and Challengers to 12(-16), 41(-11) and 122(-10) respectively.

Next I took the latest CCC sheet and added some new columns to calculate a 10-year YOC using each stock’s 1,3, 5 and 10-year compound annual growth rate (CAGR). I will call these new metrics 10YOC1, 10YOC3, 10YOC5, and 10YOC10 for simplicity.

After sorting, I looked for any companies that had a 10YOC1, 10YOC3, 10YOC5 or 10YOC10 of 10% or higher. I applied this to the list of Champions, Contenders and Challengers.

Next, I wanted to look to see if the DGR was increasing or decreasing. I highlighted in red the 10-year YOC’s of companies that were both reducing their rate of increases and still under 10%.

This is a previous example of how it looked:

Companies got credit for increasing their dividends at faster rates. For example: The 10YOC5 for AWR in the example above was 4.97 and did not get highlighted in red because its 10YOC5 was higher than its 10YOC10 of 4.09.

Next, I decided to remove any company that had a 10YOC1 in the red for Champions and a 10YOC1 or 10YOC3 in red for Contenders and Challengers.

For the Example Champions list above this removed LEG, MDT, NUE and WMT.

This new round of elimination dropped the list sizes for the Champions, Contenders and Challengers to 2(-6), 13(-6) and 48(-37) respectively.

My Results (since the results were so small I decided to not eliminate Champions & Contenders based on P/E ratios this month)

Here are the 112(+9) candidates plus additional candidates not ruled out based on P/E left that may be worthy to do further research on:

Champions

Contenders

Challengers

On the Champions list, WOW, there’s only 2! Medtronic (MDT) and VFC Corp. This isn’t a surprise as retail stocks have done poorly as well as healthcare stocks after Trump took over. I do own MDT and have been thinking about adding to it. VFC stock also looks compelling.

Then there’s the Contender’s list with names like IBM and CVS which I own. I’ve added some CVS this year already. There’s also some other bank names I’m not too familiar with worthy of looking at.

The Challenger’s list is still large with all the financials and REITs. A lot of the banks have had 5 years since the Great Recession and are back on this list. I may have to add an additional screen soon for the challengers. There’s some solid companies on this list and if you find the right ones you will be handsomely rewarded. I’ve added some AMGN not too long ago. I’m not too familiar with the others besides CSCO and ABBV.

Keep in mind that this is just a starting point and I feel these companies need further research before making an investment.You can find previous months by following my CCC Rankings label.

You may have seen my previous post: DIY: How to Install a 3-way programmable light timer. One commenter was asking about a low wattage solution and I’ve been meaning to post an update on my new timers I’m using with LED light bulbs. The install is essentially the same as the above link.

I purchased 4 of these Intermatic timers in December of 2015. They have all been working flawlessly with LED bulbs and the install was super easy.

Key Features:

Set it once – follows daily changes for sunrise/sunset times

Single-pole or 3-way applications up to 100 feet

Controls all lighting and heavy-duty loads like fans and appliances

Up to 40 on/off settings per week

Incandescent/fluorescent/LED/CFL-compatible

I had a problem with the Honeywell timer working flawlessly with LED’s. It needed a specific minimum load. This timer works perfectly with one low-watt LED bulb. Mine are currently used for outside lights with candelabra type LED bulbs.

I’m currently using these FEIT bulbs exclusively with these timers with no issues:

One of the reasons for a lack of much posting has been the birth of our first child, a healthy baby boy. And what better way to start him out than to purchase his first shares of stock!

I opened a portfolio and purchased stock in three companies that I think have been beaten down lately and offer not only fair value but decent dividends as well.

The first company is of course, Carter’s, CRI. Maybe you’ve heard of Carters or Osh Kosh B’Gosh? If not then you don’t have any kids. These brands dominate the baby clothing category. Carters stock is sitting near $85/share down from over $110/share as a 52-week high. Shares yield nearly 1.8% with a low payout ratio of 27%. They are a dividend challenger, having paid increased dividends for 5 straight years! They also just purchases another company called Skip Hop that should add additional profits to the bottom line. CFRA (formerly S&P Capital IQ) currently rates them a 4-star buy with a 3-year CAGR of 16%.

This next stock is currently a 5-Star screaming buy from Morningstar. It’s one of only 9 stocks currently ranked 5-stars. Everyone knows and has purchased this brand, Hanes! Hanes owns Hanes brands obviously which is better known for their underwear and Michael Jordan commercials, they also own Champion, Bali and Playtex to name a few. The great thing about Hanes is that their brands are everywhere and they don’t need their own retail footprint. They sell mainly online and through major department stores. You’ll even find their stuff on Amazon. The stock is rated a 3-star buy from CFRA with a 3-year CAGR of 17%. HBI currently yields 2.6% with an extremely low payout of 10%. They are also a dividend challenger, having paid out higher dividends for 5 straight years.

Now this third stock is probably more well known within the DGI community as a popular stock. It also has a much larger market cap in comparison. The stock is Disney. DIS currently yields 1.5% and is a dividend challenger. They have paid higher dividends for 7 straight years. Morningstar gives them a 4-star raiting as well as CFRA.

I’ve purchased equal dollar amount in these three stocks and plan to make small contributions to the account on a weekly basis. I’ll be tracking the performance and adding new position or dollar-cost-averaging in current ones.

I thought what better way to teach a child dividend growth investing than to purchase stock in companies that he uses products from. The retail sector has taken a beating lately and I figured I’d pick up a couple stocks there that I believe will still be around when my son goes to college. These stocks have been added to my portfolio tab for tracking purposes.

It was on the market for two months. I originally had it listed for $1200 for a month and then I dropped to $1100. I worked out a deal with my new tenant for $1000/month for a 6 month lease. I would rather collect less rent and have better tenants.

I’ll update my Real Estate page with the new information. I’m currently earning $637.93/mo after all expenses from two rental properties.

I know, I know. I haven’t been on top of updates much lately. As part of my New Year’s resolution, I plan to get more organized and start tracking my finances much better. That was, of course, the whole purpose when I started this blog. I wanted to put out there all my investments to hold myself accountable. I haven’t stopped investing and I always keep my portfolio updated but I plan to keep this site more updated in real time with what’s going on.

I hope everyone had a fabulous 2016 and wasn’t too hung over like I was for New Year’s day. On to bigger and greater things in 2017!

To start the year off right I purchased another rental in December. I was looking for one in the east Texas area that would cash flow pretty well. Here, there isn’t as much price appreciation as when I was purchasing in Austin but the cash flows should be better.

My plan is to add two or three additional rentals this year and get plans in place for building storage units for my newest idea, a storage business.

It’s been almost 3 more months since I’ve written a post. That’s just crazy! Things are finally normalizing where I’m not working every day at the restaurant. I’m starting to come up with a more consistent investing plan over the next 6 years. Stay tuned!

I Bought:

Sept: ($-28,369.25)

$900 of SBUX
$800 of CAH
$300 of DIS
$200 of RDS-B
$150 of ESV
$150 of TEVA

Lots of shares in my sharebuilder and E*Trade account were sold, approximately $37,500 net. This was for two main reasons. First, I owed more on my extended 2015 tax return than I thought. This is now taken care of. Second, I’m in the process of buying a second rental property and needed the extra cash in my account for that purchase. I sold shares in companies that had run up significantly from my purchases price. I was also anticipating a weaker market going forward with election season and the ability to hopefully purchase back shares at a better discount. I don’t plan on having to sell off shares like this again.

SBUX is a new position for me. It’s a great company selling an addicting product. What’s not to like?

I’m been building up a position in CAH. I think the generics selloff has created some buying opportunity, namely in CAH and TEVA. I’ll continue to nibble away while shares of depressed.

DIS is still a small position and I’ll slowly averaging down from my original purchases.

TIF is a fairly new position, the price popped from my initial purchases but I’m still dollor-cost-averaging when I can.

I’m looking at buying some CVS at these prices. What are you buying?

In Recent News:

I mentioned I’m in the process of purchasing another rental property. This will be rental property number 2. It’s in a small town and taking a while to get an appraisal done on it. I’ll post details on the transaction once it’s completed, hopefully by mid December.

I’ve hired full time waitstaff and don’t have to bartend much any more. I’m mainly overseeing and managing the business.

My one rental that was re-leased for a $100 increase had their lease extended until 04/30/17. It was originally going to be up in October. I’ve had the same tenants for a while.

My last business has been exited and I’m receiving proceeds over the next 6 years that I will need to invest and grow my income with.

Picture:

The picture is from a recent trip to Mexico City at the Teotihuacan ruins. I’m standing in front of the pyramid of the sun. What an amazing place!

Wow, does time fly! It’s literally been 3 months since I’ve written a post. No, I haven’t disappeared from the earth or stopped investing towards FI. I’ve just been so overwhelmed and busy starting up a restaurant that it’s consuming almost all my time.

WFM was exited in June. I think it’s a wonderful company but I just see too much competition so I just decided to sell shares near my break-even.

DEO is close to a full position so I’ll just nibble away until then.

I’m working on bringing up TD and WFC to full positions.

TIF is a new position, I love their history of paying dividends and how long the company has been in business. I used the recent weakness to pick up some shares.

FLO is also a new position. They own mainly bread brands including Wonder, Nature’s Own, TastyKake, Butter Krust and Sun Beam just to name a few. They are relatively smaller at about a 3 billion market cap so they have lots of room to grow. The stock was hammered recently as the company miss-classified some of it’s workers as temporary. Working in the staffing business, I totally know that their has been a recent crack down on this. I believe the company will pay it’s taxes and recover, I think the stock drop is overdone. The dividend is currently around 4.2%.

In Recent News:

I’ve hired a great chef and sous chef and our restaurant is quickly beginning a really popular place for a small town. I’ve hired a full-time waitress, dishwasher and another part-time waitress. I’m currently trying to find another hostess and waitress. I’m currently bartending myself until I get the other positions filled. That’s another reason I don’t have much time.

My one rental property was re-leased for a $100 increase but it’s going to be up in October. It was a short lease with the same tenant. I’m hoping to buy another rental by the end of the year as soon as the restaurant expenses are gone.

I have worked out a deal with my last business venture and I’ll be exiting that over time while getting paid. I can now focus my energy on stocks, real estate and the restaurant.

I hope to be able to write a little more often. I do always keep my portfolio updated though even if I’m not able to blog. Purchases have been a little slow but I hope that can start picking up soon.

I used $600 in new capital and added $24.35/year to my dividend income. This is an average yield of 4.06%.

Notes:

I’m still adding to DEO here. It’s slowly building up to a full position. If DEO stays under $110 , I plan to keep adding some shares. They have a giant portfolio of alcoholic beverages with great international exposure, what’s not to like?

Two weeks in a row I added some BP, although this was a smaller purchase. They are below my cost basis and I believe most negative news is already built in at this price.

In Recent News:

I’m meeting with a chef this weekend. We’ve already talked over the phone and I hope I can work out a deal for him to start working by the end of June. I am worried the chef wants to remodel the kitchen and that’s not an expense I’m looking forward to. I have opened the bar with a temporary menu. It’s been a success so far. With very little advertising, I’m getting as many people as I can handle until I’m able to hire more staff. It’s good practice and good to learn the POS system to work out any kinks.

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Disclaimer

I am not a licensed financial professional. I created this site to be informative and entertaining. No purchases I make are recommendations to buy those particular equities. I'm not liable by any party for losses you might incur. All investments are subject to losing money and you should consult a financial professional before making any investment decisions.